NEW DELHI: Real estate stocks rallied up to 3 per cent in trade on Wednesday after the securities regulator Sebi gave green signal to foreign investors to invest in REITs (Real Estate Investment Trusts).

Reacting to the development, stocks of DLF surged 2.75 per cent, Sobha 1.11 per cent, Pheonix 0.75 per cent and Oberoi Realty 0.25 per cent.

"It has been decided to permit FPIs to invest in units of REITs, InvITs (Infrastructure Investment Trusts) and Category-III Alternative Investment Funds (AIFs)," Sebi said in a circular.

REITs are investment vehicles that is a company financing income producing real estate. Modeled after mutual funds, REITs provide investors of all types regular income streams, diversification and long-term capital appreciation.